FTSE 100 Rally Fizzles Ahead of Tesco and Asos Earnings

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FTSE 100 index meteoric rise hit a roadblock in the futures market as the market waits for important earnings from Tesco and Asos. The market is also reacting to news that Debenhams and other retailers are going out of business.

Tesco Earnings Preview

Tesco earnings will probably be the biggest news today. Economists polled by Reuters expect the company to have made a profit of more than £1.85 billion in 2019. This will be a higher number than the £1.56 billion profit it made in the previous year.

The company is also expected to release excellent numbers for the first quarter. In a previous report, the company said that volume in the quarter rose by more than 5.5%. This was a better number than that reported by Aldi and Sainsbury’s.

This jump happened as more people in the UK rushed to shop in the anticipation of a lockdown. The challenge is that this jump will not last forever. In fact, the company will be affected since most of the UK is in lockdown. As such, investors will watch out for how the company’s e-commerce business will grow. A weaker number could push the FTSE 100 much lower.

ASOS Earnings Preview

The market will also be watching for ASOS earnings. The e-commerce fashion giant, which has been struggling is expected to show that revenue and earnings were hit by the crisis. Of course, as the lockdown intensifies, very few people are spending money on clothes. Recent data from the company show that sales dropped by 20-25% in the final three weeks of March. In fact, the company is seeking to borrow more than £80 million to support its operations. This will see its total debt rise to more than £350 million.

Boris Johnson Concerns

The market is also focused on Boris Johnson, the prime minister who has been in ICU since Monday. The issue is that the country could be thrown into a constitutional crisis if the prime minister is unable to work. This would be at a time when his government is negotiating a trade deal with the EU.

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FTSE 100 Technical Analysis

FTSE 100 CFDs declined to a low of £5,630, which is lower from yesterday’s high of £5,811. On the two-hour chart, the price is between the 23.6% and 38.2% Fibonacci Retracement level. This Fibonacci is drawn by linking the highest and lowest levels in March. The index also struggled to cross the 38.2% Fibonacci level at £5,861.

Therefore, I expect the index to move lower and retest the important support of $5380. The index could then move higher and attempt to retest the 38.2% Fibonacci level. The bullish momentum will remain if it moves above the 38.2% Fibonacci level at £5,861.

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